Is Digital Transformation too complicated and costly for SMEs?

What is the first thing that comes to your mind when you think about Digital Transformation? The quotes below are among the many things I have heard from people having gone through digital transformation projects, and these were all from large companies with several thousand employees. It’s bad, mostly…

“I think about an Army of consultants coming in and working with us for years to perform a complete overhaul of our business strategy and company culture!”

“I think about huge investments to rip out our existing IT systems and replace them with modern state of the art cloud solutions using bigdata and AI”

“I think about a couple of years of chaos where nobody really knows what is expected from us but management wants us to still run full steam ahead”

“We hired a top 4 management consulting firm to drive the transformation, but 9-months down the line the CDO was fired and the project stopped because we just couldn’t see any results, only costs!”

And if the mainstream perception around digital transformation is so negative, how could smaller companies, SME‘s, even consider transforming their own businesses? Why would they take the risk embarking on such a perilous journey? Mostly today there is not much choice: Adapt or risk being disrupted!

The good news is, there is a way for SMEs to adapt! But it is important to really simplify that whole transformation process and turn it into something easier to navigate that doesn’t require huge upfront investments and provides results rapidly.

But that requires a different mindset and a different approach to start with! An agile approach from the start will allow you both to see faster results and also reduce costs and risks.

But with agile, I don’t just mean software development.  Agility is related to the way you make decisions and move forward. Define your vision, your strategy, but when it comes to tactics move with small increments, validate, measure, scale.

De-mystifying strategy

First of all, I would like to demystify the whole work done around business strategy. This is the first cost you can cut and save that money for execution later on. Ask yourself, do you really need dozens of consultants to work on your strategy, analyzing markets, defining business cases for 3 to 6 months? Mostly you know what is wrong already!

I reckon that in a large corporate you might need to provide some of the deliverables produced as a record trail, to motivate some of the investment decisions, but when it comes to the plan, to the strategy, there is not much you will really learn.

With a bit a preparation work, meaning gather the right type of persons and data all working together with a workshop style facilitation you can probably define your SME strategy over 3 to 4 days. I have done this and I can tell you this is usually good enough to get started.

For an SME, the external help can be limited to a handful of consultants that will mainly bring methodologies, frameworks and provide coaching support.

Simplifying digital transformation tactics!

So here is another area where I believe consultants are overdoing it. They produce tons of PowerPoint decks, business cases and the result of that is dozens and dozens of project workstreams that are tracked in excel sheets! Seriously? Yes!

A friend that I recently interviewed told me:

” We have two main programs for our digital transformation objectives, each of them is built of close to 50 workstreams”

And then there are also the dependencies between all these projects, a nightmare to manage already from the start! But seriously this too can be simplified to a large extent for SME’s.

Many consultants start with a blank sheet of paper, or almost, and dream up initiatives with more or less questionable impact on the business, but in a hyperconnected world, we are all aware of trends or what others are doing and how we can create competitive advantage.

The number of projects can and should be reduced to properly manage complexities and dependencies.

When we execute digital transformation workshops we would normally cover 8-12 standard workstreams:

• Excelling in customer experience
• Becoming data-driven
• The hunt for digital talent
• Rethinking Digital Marketing
• Digitizing operations (Cloud)
• Automating Business Processes
• Engaging the digital workforce
• Creating a culture of Innovation

Taking such a structured approach and “standard” workstreams that can be applied to almost any business allows us to very rapidly come up with a high-level roadmap for your digital transformation journey.

The Digital transformation journey needs to fuel itself!

One of the things that are important to understand and that is true both for large corporates as well as for SMEs and that is that management nowadays is expecting business transformations to happen with very little additional cash investment.

There might be a special budget allocated at the beginning of the program as you have to do new things and old in parallel, but very rapidly you have to run your projects on current run-rates. This has a huge impact on how you build-up your transformation roadmap!

The digital transformation program will have to fuel itself, it will have to generate quick wins, in terms of new revenues or savings so that other workstreams can continuously be funded.

Consequently, a digital transformation for an SME should hence most of the time prioritize in this order:

1. Digitize key business processes and automate we can be automated (in order to reduce operating costs)
2. Excel in customer experience ( in order to improve customer acquisition, reduce churn, increase sales) and Rethink digital marketing (drive growth)
3. On the back of these initial workstreams, you will also learn what data is increasingly important for your business (the initial savings and extra revenues will help you to progressively redo some of the “plumbing”).
4. Reduce your dependency to external resources, make sure talent is developed internally for key digital skillsets like data science, cybersecurity or digital marketing. Appoint change agents to secure projects experiences are shared and learning progresses.
5. As you become more and more data-driven, you will gain more and more insights that can help you to innovate. Start innovation projects using these new insights. Take a human-centred approach using Design Thinking or similar methodology to uncover more opportunities.
6. Sustain your innovation approach and become bolder in targeting new markets or new solutions, look at adjacent markets and more radical offerings.

Stay agile!

Once you have all your workstreams in place and once you have prioritized them, it is important as you move into execution to stay agile.

What that means is that you need to quickly move into prototyping your solutions, validating them and of course correcting them if one of your initial hypothesis is rejected.

With today’s speed of change, we can almost certainly expect some of our initial assumptions to be wrong. What worked yesterday might not work today nor tomorrow and that is why we need to constantly sustain that agile mindset.

Sustain Innovative Mindsets

One of the purposes of a digital transformation journey is to become more agile as a company, react faster to new threats and be bolder in trying to capture new opportunities. This also means that you need to be ready to capture more of your own employee’s ideas or your customer’s suggestions to improve your business.

“Digital transformation is like to going to the gym, doing crunches and exercises, but innovation is your diet, that is ultimately what will keep you in shape! “ – Jean-Luc Scherer

Adapt or risk of being disrupted!

For SME’s the need to transform is as important as for large corporates, but the approach does not need to be the same. If you are systematic in your approach, if you work with a small and focused team you will be able to move mountains and it does not need to be at huge expenses.

Risks of the digital transformation journey itself can also be controlled with a more agile and streamlined approach that reduces the number of workstreams to manage. Do you want to hear more about how we can help you? Don’t hesitate to contact me at jls@innoopolis.com.

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